Fed hikes rates; CSE foreign outflow likely to continue

Sri Lanka, Sep 27 (Insights Equity) – Net foreign outflow from Sri Lankan stocks is expected to continue further as the US Federal Reserve (Fed), the Central Bank of the US, raised its short term interest rates by quarter of a percent today for the third time this year.

With LKR depreciating 9.0 percent against the USD since January 2018, net foreign outflow from Sri Lankan stocks has reached LKR6.0 bn (USD35.4) year-to-date, while the market has declined by 8.2 percent so far this year.

Since March, when the Fed rate was raised by quarter of a percent, net foreign outflow from Sri Lankan stocks has reached LKR11.9 bn (USD70.7 mn) despite the market witnessing a net foreign inflow of LKR6.6 bn (USD35.9 mn). in the first two months of the year.

Foreign outflowFollowing today’s hike, the ninth since 2015, Fed’s benchmark overnight lending rate is set in a target range of 2.00-2.25 percent as the US tightens its monetary policy to curb rising inflation and cool off an overheating economy.

Meanwhile, Sri Lanka witnessed only two rate revisions of its benchmark Standing Lending Facility Rate since 2015: 0.25 percent hike in July 2016 and 0.50 percent cut in April 2018.

FEd Rate

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